Part 2 Overview of the International Air Services Commission

The role and functions of the Commission

The Commission is an independent statutory authority established under the International Air Services Act 1992 (the Act). The object of the Act is to enhance the welfare of Australians by promoting economic efficiency through competition in the provision of international air services, resulting in:

increased responsiveness by airlines to the needs of consumers, including an increased range of choices and benefits;

growth in Australian tourism and trade; and

the maintenance of Australian carriers capable of competing effectively with airlines of foreign countries.

The Commission's primary responsibility is to serve the object of the Act by allocating capacity entitlements to Australian airlines for the operation of international airline services. The capacity allocated by the Commission comes from entitlements available to Australia's international carriers under air services arrangements between Australia and other economies. In particular, the functions of the Commission are to:

make determinations allocating capacity to Australian carriers in both contested and uncontested situations;

renew determinations on application by carriers;

conduct reviews of determinations; and

provide advice to the Minister about any matter referred to the Commission by the Minister concerning international air operations.

The Act is complemented by a policy statement from the Minister. The Minister's policy statement sets out criteria to be applied by the Commission in various circumstances. More complex public benefit criteria may be applied in cases where there are two carriers seeking the same limited amount of capacity, compared with an uncontested application from a well-established airline. The Minister's policy statement is a legislative instrument under section 11 of the Act. It is reproduced at Appendix 61.

Determinations allocating capacity are usually made for a period of five years for routes where capacity or route entitlements are restricted. In cases where capacity entitlements and route rights are unrestricted, determinations may be issued for a period of ten years. In either case, the Commission has the discretion to make interim determinations, which are for a period of three years. Interim determinations are normally made when capacity is being allocated to a new Australian operator. If an applicant requests that a determination be made for a shorter period, the Commission has the option to agree to this.

Carriers normally wish to renew determinations as they come towards their expiry date. The Commission is required to start reviews of these determinations at least one year before they expire. Except for interim determinations, there is a rebuttable presumption in favour of the carrier seeking renewal that the determination will be renewed as sought. The presumption does not apply if an initial new Australian carrier seeks to enter the route but there is not sufficient capacity available for that carrier to develop an efficient and sustainable operation (referred to as the ‘start-up phase). The presumption may also be rebutted after the start-up phase on the route if:

the carrier seeking renewal has failed to service the route effectively; and

if the use of the capacity in whole or part by another Australian carrier that has applied for capacity would better serve the public having regard to the criteria set out in paragraph 4 and 5 of the Minister's policy statement.

From time to time, airlines apply to the Commission to vary determinations held by them. There can be a number of reasons for an airline to seek a variation—for example, the airline may be seeking authorisation to use its allocated capacity to code share with another airline. The Commission conducts a review of the determination and as part of this process, it invites submissions about the application. In the case of applications to authorise code sharing, where the capacity that can be used for code share operations is available under the relevant air services arrangements, the Commission would generally be expected to authorise such applications. If the Commission has serious concerns that the proposed code share may not be of benefit to the public, it may subject the application to a more detailed assessment using the paragraph 5 criteria in the Minister's policy statement. Before doing so, it is required to consult the Australian Competition and Consumer Commission.

The Commission may itself initiate a review of a determination if it is concerned that a carrier might be in breach of a condition of the determination. This can occur, for example, where a carrier has been allocated capacity, but had not used that capacity by the time it was required to do so by the Commission. Having conducted such a review, the Commission may confirm, vary, suspend or revoke the determination.

The Commission has published procedures it follows in considering applications and making determinations. A summary of these procedures is at Appendix 5. The procedures are designed with the aim of ensuring that applicants and other interested parties understand the requirements for making applications or submissions, are familiar with the Commission's decision-making processes, and are aware of their rights and obligations.

Executive profile

The Act provides for a Chairperson and two Commission members. Currently, the Commission is comprised of a Chairperson, Dr Ian Douglas, and a Member, Ms Jan Harris. Both were appointed by the Governor-General on a part-time basis.

The membership of the Commission as at 30 June 2017 is as follows:

Dr Ian Douglas

Dr Ian Douglas was appointed by the Governor-General as part-time Chairperson of the Commission for a three-year term commencing on 5 May 2016. He has been a Member of the Commission since November 2012. He was Acting Chairperson from October 2015 to May 2016.

Dr Douglas is a Senior Lecturer in Aviation Management in the School of Aviation at the University of New South Wales (UNSW). He holds a Doctor of Business Administration and a post graduate qualification in Higher Education. His doctoral research addressed the impacts of state ownership and economic freedom on airline financial performance. His ongoing research interests encompass the areas of air transport economics and airline business model convergence. Prior to academia, Dr Douglas had a long career with Qantas Airways, with senior roles in pricing, business development, route management, strategic planning and the Joint Services Agreement with British Airways. Since leaving Qantas, he has consulted to a range of companies including Malaysia Airlines, Thai Airways International, Bain & Co Singapore, Icebox Advertising, Asian Wings Airways and Tourism Queensland. His teaching areas at UNSW Aviation include fleet and network planning, marketing and distribution strategy and air transport economics.

Ms Jan Harris

Ms Jan Harris was appointed by the Governor-General as a part-time Member of the Commission for a three-year term commencing on 24 November 2016.

In addition to her role in the Commission, Ms Harris is currently a Non-Executive Director of the Bendigo and Adelaide Bank and an External Member of the Audit and Risk Committee of the Australian Security Intelligence Organisation.

In 2015–16, she was a member of the Independent Panel for Eliminating Duplication across NSW Government Agencies.

Ms Harris has had a distinguished career in the Australian Public Service culminating in being the first female appointed as Deputy Secretary of the Department of Treasury, a position she held from 2013 to 2015. She spent most of her working career in Treasury working on budget policy issues, international financial and economic issues, Commonwealth-State financial issues, competition policy, monetary policy, financial markets and taxation policy. She also worked in the Department of the Prime Minister and Cabinet from 2003 to 2007, and was the Economic Counsellor to the Organisation for Economic Co-operation and Development (OECD) in Paris from 1997 to 1999.

Ms Harris graduated in 1981 from the Australian National University with a degree in Bachelor of Economics (Hons).

Commissioners' attendance at meetings in 2016–2017

Commissioner

Number ofmeetings possible

Number ofmeetings attended

Dr Ian Douglas

13

13

Ms Jan Harris

9

9

The Secretariat

The Commission is assisted in its work by a small Secretariat. The Secretariat is comprised of officers of the Department of Infrastructure and Regional Development (the Department). The Secretariat is headed by an Executive Director, supported on a part-time basis by an Administrative Officer. The Secretariat provides advice and assistance to the Commissioners on all aspects of the Commission's operations.

Communications with interested parties

There are many stakeholders with a direct or indirect interest in what the Commission does. They include:

the Minister;

current and prospective Australian international airlines;

the broader aviation industry, including airport owners, providers of services to airlines and employee associations;

the international tourism and freight industries, including Australian exporters;

Australian and State Government departments and agencies;

aviation industry investors, analysts and journalists; and

the travelling public.

The Commission places great importance on maintaining effective relationships with those stakeholders. The Commission takes into account the views and/or interests of the stakeholders in its decision-making processes, as appropriate to particular cases. Regular electronic notification of applications and the Commission's determinations and decisions keeps interested parties up to date with the Commission's activities. At the conclusion of each financial year, the Commission invites stakeholders to provide feedback about the Commission's performance throughout the year. The aggregated results of responses to the survey this year are presented in this annual report at pages 25 to 26.

The role of the Department of Infrastructure and Regional Development

The Commission works closely with the Department, which has responsibilities complementary to those of the Commission. The Department is responsible for the negotiation and administration of air services arrangements between Australia and other economies. An important part of the negotiating process is to provide opportunities for Australian and foreign airlines to expand their services between Australia and other economies.

The capacity and route entitlements for Australian carriers under each set of air services arrangements are recorded by the Department in a Register of Available Capacity. This is maintained by the Department, in accordance with the requirements of the Act and is available on the Department's website infrastructure.gov.au/aviation/international/capacity.aspx.

An Australian carrier may apply to the Commission for allocation of capacity recorded on the register as available for immediate allocation. The entitlements on the Register of Available Capacity are adjusted as determinations allocating capacity are made by the Commission, as airlines hand back unused capacity and when the Department negotiates new or revised capacity entitlements on behalf of the Australian Government. There is regular communication between the Department and the Commission on these matters.

Another area where the roles of the Commission and the Department intersect is in relation to applications from prospective new Australian airlines wishing to operate scheduled international services. Before allocating capacity to an applicant airline, the Commission must be satisfied that the airline is both reasonably capable of obtaining the regulatory approvals necessary to operate on the route and of implementing its proposed services on the route. The Department is responsible for designating and licensing Australian airlines to operate regular scheduled international services. The Commission consults the Department as to whether an Australian airline is reasonably capable of obtaining the regulatory approvals necessary to operate. Furthermore, an airline must hold an allocation of capacity from the Commission before the Department can make operational decisions in relation to the capacity on the route, including the issue of licenses and scheduled international timetable approvals. The Commission and the Department therefore consult closely in cases involving proposed international air service operations by Australian carriers.

1 The existing policy statement, issued in 2004, is currently under review. It was originally scheduled to sunset on, and therefore cease to be in force from, 1 April 2017 but the Attorney-General deferred the sunsetting of the policy statement until 1 April 2018.